Health Plans Release Affordable Care Act 101 Guide

SACRAMENTO, Calif., April 29, 2013 /PRNewswire/ -- In releasing a new guide today to help Californians understand how the Affordable Care Act (ACA) will fundamentally change the state's insurance marketplace, the California Association of Health Plans (CAHP) pointed out that the most extensive impact will be in the individual market, where some small businesses and individuals purchase coverage.

This restructuring of the state's individual insurance market will result in more comprehensive benefits, expanded coverage and subsidies for many individuals to purchase insurance. While many individuals will pay less for coverage, some will see premiums rise. Many Californians are unaware of what the ACA will mean for them, and the guide CAHP issued today can serve as a basic roadmap for the upcoming changes.

"The ACA will provide a host of benefits for Californians, from expanded coverage to federal subsidies," said Patrick Johnston, president and CEO of the California Association of Health Plans. "However, premiums will still rise for some individuals. Lower out-of-pocket expenses, more comprehensive benefits and the elimination of annual and lifetime limits will ultimately help offset those increased premiums."

Today, the individual market represents just 5.6 percent of the insured population, as three out of four Californians already receive coverage through their employers or the government. For those in the individual market, the ACA has established a new marketplace, called Covered California, where they can shop for coverage, beginning October 1, and qualify for subsidies, based on their income. Those subsidies will mean most moderate- to low-income Californians will pay less for coverage than they did before the ACA, and they will enjoy better benefits. Californians on the lowest end of the income scale could see their premiums decline by as much as 84%, while middle- and upper-income Californians could see their premiums rise 30% on average, according to a study commissioned by Covered California. Other major changes they can expect are:

Health plans will pay for a greater percentage of costs, and some out-of-pocket expenses will go down. Paying less out-of-pocket for co-pays and deductibleswill mean higher premiums because the premiums will absorb more of the underlying cost of care.

Those who currently purchase individual insurance will now be buying a different type of policy—one that more closely resembles an employer-sponsored plan with more extensive coverage. The plans available in 2014 will have more comprehensive benefits and services than the "bare-bones" policies available in the individual market today. Californians in the individual market may pay more than they have before for the additional benefits – even if those are benefits they may never use, such as pediatric dental care for beneficiaries who have no children.

People can't be denied coverage for pre-existing conditions, and they can't be charged higher premiums for poor health status. The cost of health care for those with pre-existing conditions will be shared among everyone in the insurance pool.

Some young people will see their premiums increase. The ACA limits the amount by which health plans can vary premiums based on age. Currently, health plans may charge younger people up to five times less than what they charge older people because health care spending on young people is generally much lower. Beginning in 2014, older people can only be charged three times more than younger people.

Higher anticipated enrollment among older individuals means higher health care costs. Many individuals entering the insurance pool will be Baby Boomers, which will increase the average age of the insured population. Since people tend to need more health care as they age, total health care costs for everyone in the insurance pool will increase.

Many people will be eligible for subsidies. Even though total premiums are expected to increase for some, many individuals and families will qualify for public insurance (Medi-Cal) or federal subsidies to help them purchase coverage.

The ACA and state law place tight limits on health plan profits and administrative costs, requiring plans to spend 80-85 cents out of every premium dollar on medical costs, and those medical costs are rising. Many factors contribute to increased premiums, such as the rising cost of hospitalization, doctors' visits, medical tests, prescription drugs and other health care services. Unnecessary treatments, tests, hospitalizations and drugs account for about one-third of U.S. health expenditures. About 40% of adult Californians live with at least one chronic condition, like obesity and diabetes, and chronic conditions account for more than 75% of all heath care costs.

California's health plans are committed to improving affordability and the quality of care for all Californians. Health plans are working to reduce health care costs by providing wellness programs and free counseling for depression, quitting smoking, losing weight, eating healthier and reducing alcohol use. California's health plans remain dedicated to increasing affordability and quality of care for all. Only by all of us working together – hospitals, doctors, patients, insurance companies and government – will we find the right prescription for delivering health care more efficiently and affordably.

CAHP is a statewide trade association representing 39 full-service health plans. Through legislative advocacy, education and collaboration with other member organizations, CAHP works to sustain a strong environment in which our member plans can provide access to products that offer choice and flexibility to the more than 24 million members they serve. For more information, please visit www.calhealthplans.org or call (916) 552-2910.